A future Labour government would bring billions of pounds worth of contracts signed under the controversial Private Finance Initiative back into the public sector, John McDonnell has announced.

Delivering his keynote speech at the Labour Party conference in Brighton, the Shadow Chancellor said it was a "scandal" that PFI deals would result in nearly £200 billion paid to private companies from the public sector over the next few decades.

Under Jeremy Corbyn's leadership, Labour has already promised not to sign any new PFI deals but Mr McDonnell won rapturous applause as he told delegates: "We will go further. I can tell you today, it's what you've been calling for, we'll bring existing PFI contracts back in-house."

Later, Labour sources qualified the statement, saying the party in government would "review" all PFI contracts and “if necessary” bring them back in-house.

They said the party would aim to ensure NHS trusts, local councils and others did not lose out and that services and staff conditions were not harmed.

Labour will develop alternative public sector models for funding infrastructure with the aim of saving tax-payers' money and improving services and working conditions, they added.

According to HM Treasury figures published in December 2016, as of March that year there were 716 PFI and PF2 projects with a capital value of almost £60bn. PFI contracts have been signed in more than 20 sectors and by more than 100 different procuring authorities.

Introduced by the Conservatives in the 1990s, PFIs were greatly expanded under the Blair Government. The attraction was the speed at which public projects such as schools, hospitals and roads could be built. Instead of the taxpayer spending millions of pounds on projects, private consortia would take them on and run them for a set number of years.

However, the policy has led to complaints that the NHS and other public bodies have been forced to pay many times the original value of properties over the course of decades, while the contracts are frequently sold on by the original consortium.

In Scotland, the SNP last month denounced what it described as “Labour’s toxic legacy” of PFI contracts after officials figures confirmed payments had risen to over £1bn per year for the first time.

Earlier this year, it was claimed NHS boards in Scotland faced paying back £10bn to firms for new hospitals that cost just £2bn to build under PFI. One, the Royal Infirmary of Edinburgh, will cost the public purse around £1.4bn over the course of a 33-year contract.

Mr McDonnell told conference: "The scandal of the Private Finance Initiative, launched by John Major, has resulted in huge long-term costs for taxpayers, whilst handing out enormous profits for some companies.

"Profits which are coming out of the budgets of our public services.

"Over the next few decades, nearly £200 billion is scheduled to be paid out of public sector budgets in PFI deals. In the NHS alone, £831 million in pre-tax profits have been made over the past six years.

"As early as 2002 this Conference regretted the use of PFI. Jeremy Corbyn has made it clear that, under his leadership, never again will this waste of taxpayer money be used to subsidise the profits of shareholders, often based in offshore tax havens.

"The Government could intervene immediately to ensure that companies in tax havens can't own shares in PFI companies, and their profits aren't hidden from HMRC. We'll put an end to this scandal and reduce the cost to the taxpayers," he added.

Later, Peter Dowd, the Shadow Chief Secretary, said winding up PFI contracts could be “pretty self-financing” but did not elaborate.

However, John Appleby, chief economist at the Nuffield Trust, a heath charity, suggested the cost could top £55bn. Stressing how it would be difficult to make a considered judgement until all the details were known, he nonetheless suggested the policy would be costly as firms with PFI contracts would want compensation.

He told the BBC: “In the NHS in England, it is paying around £2bn a year in [PFI] repayments and they will peak in about 2028, 2030. I suppose if you add those up from now to the end of those contracts - the contracts end at different period - we could be looking at something like £56bn by 2048 in terms of payments.

“That’s a huge figure, of course; that’s getting on for half of what we spend on the NHS today. Of course, taking these back into public ownership, as it were, doesn’t come free. And the money would have to come from somewhere, either taxes or borrowing or reprioritising other public spending,” he added.

But a party spokesman responded by saying shareholders would be compensated in the form of Government bonds with Westminster assessing the appropriate level of compensation when contracts were returned in-house.